Among all other major asset classes including stocks, bonds, and cash equivalents, why we invest in real estate? When it comes to real estate, though, you’ll find widely divergent opinions about its importance in an investment portfolio. It is debated whether should investing on real estate, so it’s necessary to identify positives of invest your cash into real estate sector.
What is Real Estate?
Among all other major asset classes including stocks, bonds, and cash equivalents, why we invest in real estate? When it comes to real estate, though, you’ll find widely divergent opinions about its importance in an investment portfolio. It is debated whether should investing on real estate, so it’s necessary to identify positives of invest your cash into real estate sector.
Real estate is property consisting with lands, buildings along with its natural resources such as crops, minerals or water; immovable property of this nature. In terms of law, real is in relation to land property and is different from personal property while estate means the “interest” a person has in that land property.
Positives of Invest in Real Estate
- This is an investment option which we can leverage value our investment. As an investor, you don’t need to have incur full asset value at one time and able to invest partial of the asset value and own it.
- When the real estate market increases in over time, then can sell it for a solid profit compared to invest in other portfolios. Even in the economic downturn, the investment properties in your portfolio might still be increasing in value, protecting you from the losses other investments.
- When compared to stocks or bonds, which have a global, efficient market, real estate often has a local, inefficient market. This means that if you are willing to look, you can probably find some bargains out there much more easily than you can find a bargain stock.
- One of the goals of diversification is to have investments that are not correlated with each other. In other words, when investment A drops in price you have investment B that does not. When compared to stocks and bonds, real estate is not perfectly correlated with other investments and therefore provides diversification.
- Real estate investment is an inflation hedge. Rents and property values tend to rise as prices rise, preserving your purchasing power of a currency. So in economic downturn situation, invest in real estate would be an effective choice in Sri Lanka.
- Investing in real estate can provide cash flows which most investments don’t. Property owner can rent it out and can earn monthly cash flow.
We can conclude that in the Sri Lankan context land is very limited asset though it’s ideal to invest in real estate market. Although in economic recession period it’s a wise choice to invest in properties rather than stocks, bonds which decrease the value due to inflation.